News quarterly update Rabobank
'Most pig farms still have buffers'
The downward pressure on pig prices will continue into the fourth quarter, as a rapid recovery in export volumes to China is highly unlikely. That's in the quarterly update Pig farming of the Rabobank. In China, there has been a sharply reduced domestic demand for pork and a high level of frozen stocks. Although prices have been bad for some time, the bank notes that many pig farmers still have financial buffers at their disposal.
Carcass prices are under pressure throughout Europe. The average pig price in September was 16% lower than the five-year average. Piglet prices fell even more and were 24% lower than the five-year average. In addition to the lower demand and price formation in China, African swine fever, Covid-19, and the subsidy scheme for the remediation of pig farms also play a role. "Changes in selling prices are not new for pig farming, but the differences are now very large," says sector manager René Veldman.
While the production of pork in the European Union and the United Kingdom increased at the beginning of this year, production fell in the past quarter and will return to the level at the end of 2020. Pork production is stabilizing. According to Rabobank, the catching up that meat processors made after the disrupted production at the beginning of 2020 due to Covid-19.
Pork exports have fallen sharply since April
Pork exports, which were at a high level at the beginning of 2021, have also fallen sharply since April. Veldman: "The EU is more than 120% self-sufficient in pork, so there is a great deal of dependence on exports. Pig farmers have been able to benefit from this in recent years, but unfortunately the situation is different now. Demand is lower in China and prices have fallen sharply. That is also pushing the price down considerably in the EU."
Sector manager René Veldman
Pork exports to China have been declining since April, with a drop of no less than 34% in July compared to July 2020.
The Netherlands exported 472.000 fewer fattening pigs up to and including week 38 (end of September) compared to the same period a year earlier. This lower export will account for 3% of the total pig slaughter in 2020. According to the quarterly update, the lower export of finishing pigs may have caused the Dutch finishing pig production to increase by 7% over the first seven months of this year compared to 2020.
Piglet exports have also fallen. The Netherlands exported 271.000 fewer piglets in the first 38 weeks of 2021 than in the same period a year earlier. This is due to the decrease in the sow herd of 12% in 2020 compared to 2019, partly as a result of the subsidy scheme for the Remediation of pig farms.
In Germany too, 18% more sows were slaughtered in the first seven months of this year, compared to the same period a year earlier. The oversupply of pork on the domestic market, which was caused by export restrictions due to the African swine fever outbreak, is therefore partly decreasing. Higher feed costs in combination with lower producer prices in the 27 EU countries and the UK will also slow production, according to Rabobank.
Other export markets still offer opportunities
Pork exports from the 27 EU countries to the United Kingdom fell by 2021% in the first half of 9. Other export markets still offer opportunities, according to the quarterly update. Exports from the 27 EU countries and the UK to the Philippines and Vietnam increased by 223% and 75% respectively in the first seven months of this year compared to the same period a year earlier. The reduced import tariff for pork in the Philippines will increase by 5% in the fourth quarter, but will still be 20% lower than before.
Still sufficient financial resources
"Due to good financial results in 2019 and 2020, most pig farms still have sufficient financial resources," says Veldman. "But I can imagine that some pig farmers are concerned. It is important that there is good insight into the financial situation and that they enter into discussions with their bank in good time if additional working capital is required."
Linda van Eekeres
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